ManipulationMarket manipulation refers to purposeful or intentional attempt at interfering with the free and fair market operations. Market manipulators try to build artificial, deceptive appearances with regard to the price of, as well as the market for a commodity, security or currency. Market manipulation is illegal and has been prohibited in the U.S. under Section 9(a) (2) of the Securities Exchange Act of 1934. Australia has also prohibited the practice of market manipulation under Section s 1041A of the Corporations Act 2001. According to the Act, transactions which produce an artificial price or try to maintain an artificial price with regard to a tradable security is termed as market manipulation.

There are several ways in which market manipulation may occur. These are:

Illegal insider trading: Illegal insider trading takes place when a particular trade is influenced by the privileged few who have access to some corporate information, which has not yet been publicly announced. Since the information has not yet been made open to several other investors, the few lucky persons use that knowledge to have an unfair advantage over the remaining market. Making use of nonpublic information for the purpose of trade goes against the very norm of capital market, which is transparency.

Pools: Often written agreements are made among a specific group of leaders to entrust the authority of trading in a particular stock for a fixed time period on a single manager. Later the profit or losses are distributed amongst everyone.

Churning: This refers to a trader placing both buying and selling orders at the same price designed to attract more investors to increase price.

Wash trade: This is an attempt to sell and repurchase the same security for generating increased activity and price.

Bear raid: This is an effort at pushing the stock price down through heavy or short selling.

MarginIn finance, margin represents the act of borrowing money in order to invest in securities. Margin will expose investors to risk due to the interest payments on the borrowed amount. Margin buying takes place when individuals use securities as collateral to the borrowed money. The cash, used for the investment, represents the difference between the value of the collateral and the amount of the loan. This difference should exceed the minimum margin requirement. In other words, it has to meet all margin requirements. Firstly, the current liquidating margin will be calculated in view of gains and losses from the closing-out of positions. If an individual has a short position, he has to furnish securities. The current liquidating margin represents the buy back sum. On the other hand, a margin from long positions results in calculator credit.

The variation margin stands for additional margin that is required to position an account at a proper lever with regard to the market fluctuations. In other words, the variation margin represents a deposit of additional assets in case that the market displays high degrees of volatility. On its part, the premium margin refers to the sum of money that is necessary to close out a position. The additional margin stands for the possible loss in case of a worst-case scenario.

The initial margin requirement represents the sum of the collateral that is necessary to open a position. The maintenance requirement refers to the amount that is kept in the form of collateral until the position is closed. The maintenance requirement is typically lower than the initial margin requirement. However, reduction of the potential risks may require the placement of the maintenance requirement closer or equal to the initial requirement. A margin call may be issued if the margin is below the minimum margin requirement. Then, the investor will have two options. He has to either increase the margin amount or close the position.

Margin CallA margin call refers to a broker’s call or demand to an investor utilizing margin for depositing additional securities or money. This is done to facilitate the margin account to rise till the minimum margin of maintenance. Margin calls take place due to your margin account value depressing to a certain level calculated by the respective broker’s formula. This is also sometimes referred to as a “fed call” or “maintenance call”.

When is a margin call issued?Prices do tend to fall rapidly in a volatile market. If the equity –the difference between what you owe the broker and your securities value in your account makes a downward slide and reaches below the minimum maintenance margin, your brokerage is bound to issue a margin call. In this situation you have the option of either liquidating your position in the stock or adding more cash to that account. Let us assume you buy $20,000 value of securities. You do this by borrowing from your brokerage $10,000, and you manage the rest yourself. When the market value of the securities fall to $15,000, the value of the equity in the account also lowers to $5,000 ($15,000 - $10,000 = $5,000). Now if the maintenance margin of your brokerage is 40%, which is (40% of $15,000 = $6,000), you will be issued a margin call since the value of equity in your account is less i.e. worth $5,000.

What happens when you do not pay heed to a margin call?The brokerage in this case, can sell the securities you own to increase the equity value in your account. Sometime he may not even consult you prior to selling. It is highly recommended that you carefully read the brokerage’s margin agreement prior to investing.

Market OrderA market order refers to an order for buying or selling a stock immediately at the available best current price. “Unrestricted order” is often used synonymously with the term market order. A broker is entrusted with the responsibility of carrying out the market order by his or her client.

What are the advantages of a market order?

A market order almost provides a guarantee with regard to its execution.

A market order often accompanies minimal commissions. This is because of the fact that brokers are required do less amount of work.

A market order is generally less expensive compared to a limit order. A limit order refers to buying a security at a price which should be no more than what has been stated by the owner.

Another advantage of the market order is that it can be placed by an investor sitting in any part of the world. The broker is the only person needed to completely take care of the entire transaction. In fact, this is the easiest and the most convenient type of order to carry out for a broker. The transaction can be completed within a couple of minutes.

There are several markets in which market orders are placed. These are stock market, commodities market or bond market. You should be cautious of using the market orders in low average everyday volume or quantity of stocks. This is because in this type of order, price is paid at the time of execution of order. In a volatile market, the price may not be remaining the same as that which is presented by a “real-time quote service”. Thus there is always the possibility of ending up with paying much more than you earlier had anticipated. The safest is to use the market order on stocks of high volume.

Market PriceThe Market Price (also called Current Quote) is the last reported price at which a security or bond has been sold.

Maturity DateThe Maturity Date is a date on which the principal of a loan or other debt instrument like bond has to be repaid in full.

Mergers and AcquisitionsIn the corporate world, mergers and acquisitions refer to the establishment of a single company through the combination of their assets and liabilities. If the firms are fairly equal in size and breath, one of the companies issues and distributes shares among the shareholders of the other company. The merger typically involves stock swap so that the two entities bear responsibility for all risks. This article will mention several types of possible mergers but the list is not exhaustive.

Horizontal mergers will occur between two or more entities that are engaged in the production of similar goods and services. In addition, they are usually in direct competition for a particular segment of the market. Vertical mergers, on the other hand, stand for mergers between entities that specialize in different products which go into the composition of another product. This kind of merger occurs in order to combine assets and to strengthen the position of the two entities. The market extension mergers take place between companies that sell the same type of product in different market niches. On the other hand, the product extension mergers involve companies that target the same segment of the market and sell similar products and services. Finally, purchase mergers occur when one entity acquires another through direct sale. It should be mentioned that mergers result in job losses. The new entity does not need twice the number of employees in its accounting, marketing, and sales departments. From the shareholders` perspective, mergers help to reduce direct costs.

Acquisitions stand for the takeover of one entity by another. In the legal sense, the target firm will stop functioning as a separate and distinct entity. One company will purchase most or all of the company’s ownership of another firm. Typically, acquisitions represent a part of an investment strategy which aims at further growth. They occur when companies consider it more beneficial to acquire existing businesses than to expand on their own.

Market FundShould anyone decide to invest in low-risk securities, he must be informed that a mutual fund type is required by law. It is called a money market fund. The interest rates are usually short term and these types of funds are generally considered low risk when compared to other mutual funds.

The prime investment targets for the money market funds are securities, known for their low-risk, such as certificate of deposit, government securities, and commercial papers. They aim at keeping the net asset value per share at 1$ with only the profit margin going up or down. It may be the case, however, that when the investment is bad or performs unsatisfactory, the NAV may drop under $1 per share. While rare it is still possible that losses to occur in money markets.

In contrast to a bank money market account for depositing, the funds have not been issued by the federal government. The Treasury Department of the U.S. declared on 19th of September, 2008 the founding of a guarantee program for the mutual fund industry of the money market in United States. The money market funds are subject to rule 2a-7 of 1940’s Investment Company Act, which are offered to the public and on record with the Commission for Securities and Exchange, and are able to enlist.

Prior to making an investment decision, in regard to a money market fund, it will be a good idea to acquire and revise all the information that is available for the fund. This includes the profile of the fund should it have one and of course, a recent report for the shareholders.Mainly regulated under the 1940’s Investment Company Act, the money market funds rules are in force under it and in particular, Rule 2a-7, which is a part of it. Known as stability funds, they aim at limiting losses that may be a result of liquidity, credit or market risk.

MullahA Muslim teacher or interpreter of the religious law: used as a general title of respect for a learned man.

Mutual FundsA mutual fund collects money from a number of investors and then invests them in money market instruments that are short term, stocks, bonds, and other securities types. It will have a fund manager responsible for regular trade with the money collected. Normally the net profits or the losses are distributed among the investors on an annual basis.

The types of investment companies known in the U.S., since 1940, have basically been three types-unit investment funds, closed-end funds and open-end-funds. The last are also known as mutual funds in the U.S.

The investment portfolios of the mutual funds are constantly a subject of adjustment and supervision by a manager. He is responsible for the cash flow forecasts as well as reporting on the investments that will perform well in the future in view of the fond. He will choose between those he deems worthy for the investment objective of the fond. The administration of the mutual fund is done under a contract with a management company, responsible also for the hiring of managers.

Under a special set of accounting and regulatory tax rules, the mutual funds in the U.S. are not taxed on income when it is distributed among their shareholders at 90 percent. The funds must also account for particular requirements in regard to the Internal Revenue Code. Distributions on municipal bond income, that is tax free, are also tax free for the shareholders. However depending on the way the fund has acquired distributions, the distributions subject to tax can be capital gains or ordinary income.

Several advantages are notable when the mutual funds are compared with individual stocks` investments. For example, divided among the shareholders of the mutual fund, the transaction costs are lower. A professional fund manager may also contribute to the investors` adequate decisions due to his expertise and dedication to managing the options for investment.